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VAT and payroll tax

The Danish Tax Agency

Calculation of payroll tax

Once you have registered for declaration and payment of payroll tax, you need to know how to calculate the correct payroll tax.

Calculate payroll tax and payroll cost

How much a business is liable to pay in payroll tax depends on which type of business it is. Calculation of the payroll tax is divided into four different methods. The tax base and the tax rate differ for each method.

You calculate the payroll tax by calculating the tax base and multiplying it by the tax rate. See more in the folding texts below about how to calculate payroll tax using each of the four methods.

In some cases, a business may also have activities that are subject to VAT or activities that are subject to payroll tax under several methods.

Read more about how to calculate payroll tax on this page.

For more detailed and comprehensive legal information, see our Danish-language legal guide.

Payroll tax rates

You can find an overview in Danish of the tax rates for the individual methods under ‘Satser for lønsumsafgift’ (Payroll tax rates) at Beregning af lønsumsafgift (Calculation of payroll tax).

For more detailed and comprehensive legal information, see our Danish-language legal guide.

Declaration of mixed activities

If your business has activities that are subject to payroll tax and also has activities that are subject to VAT, you are only liable to pay payroll tax on the activities that are subject to payroll tax.

Businesses that are engaged in activities for which they are liable to pay payroll tax and that are also engaged in other activities must break down the business’s payroll cost and profit/loss on the activities that are subject to payroll tax and on the other activities of the business based on a specification in the business’s financial statements.

A specification in the financial statements is to ensure that the business only pays payroll tax on the relevant activities.

Read more in Danish at Indberetning ved blandede aktiviteter (Declaration of mixed activities).

For more detailed and comprehensive legal information, see our Danish-language legal guide, section D.B.4.6 ‘Metodernes prioritering’ (Prioritisation of the methods) and section D.B.4.7 ‘Virksomheder med blandede aktiviteter LAL § 4, stk. 4’ (Businesses with mixed activities, section 4(4) of the Danish Payroll Tax Act).

Please see our legal guide (in Danish) for further legal information.

Updated 12.03.2021
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